Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock doesn’t get the respect it deserves. It doesn’t have the momentum-trade moniker, yet it quietly acts like one. This happened the day it became part of the famed FANG group of mega caps, joining momentum stocks like Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX).
So on the way down, it now falls faster than it should. Case in point, last night Alphabet management reported earnings, and the stock fell 8% on the headline. They disappointed Wall Street and traders hit the sell button fast, even though the stock had actually closed up 1.5% during the day.
Luckily, coming into the earnings report, GOOGL stock was up 24% year-to-date. Although this is only half as much as FB, GOOGL performance is still impressive, as it outpaced the S&P 500 by 40%.
GOOGL Stock by the Numbers
GOOGL did meet its profit targets, but it missed the sales expectations. the company delivered 17% revenue growth, but the forecasts were higher still. They grew paid clicks 39% year over year, so it’s not like the quarter was a disaster. This is a matter of lofty expectations.
While the S&P 500 is at all-time highs, investors need to see more than an OK report to buy the stock. This one lacked the pizzazz, so they are booking some profits. Management definitely gave the bears all they need to sell the headline. But the crucial thing here is that the long-term story remains bullish.
And therein lies the idea today: This dip is an opportunity to buy GOOGL stock.
After all, Alphabet stock set a new all-time high Monday before the earnings, so those who had wished they were long it a few hours ago can get on board now at a lower price.
The technical chart levels also support the thesis of support, since this dip also brings Alphabet stock back to the neckline from which it broke out in March. On the way down, these pivotal zones are supports. The bears will need even worse news to significantly breach through the support below $1,190 per share.
On March 1, GOOGL stock broke out from $1,150 per share and traced out a measured move off a cup and handle bullish pattern. A normal price action includes dips from the target zones. As they say that nothing goes up forever and it will find support there too.
In this case the breakout neckline also came after a 17% rally from the December lows. This means that the GOOGL stock here is falling after rallying 30% from Christmas to Monday’s highs.
So in summary, the GOOGL earnings results are disappointing, BUT they don’t make it a short thesis. The support zones should hold. This is a great American company that has been changing our world for the better for years, and it’s not done yet. It completely dominates search, which is their cash cow, but they are not sitting still. Alphabet is still committed to finding new profit centers and has great segues into the proper trends to come. They have investments as “other bets” into AI, the cloud and driver-less technology.
So they are focused on the mission they’ve had for a while. This is to say nothing about the profit potential of the massive YouTube platform, where growth remains the most tangible differentiator for the next two years.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits.
